August 15, (THEWILL) – In order to mitigate the effects of the challenging economic environment on small businesses, the Development Bank of Nigeria (DBN) has stepped up financing support for the Micro, Small and Medium Enterprises (MSMEs) across the country.
The Bank has also taken major steps to ensure that its processes and operations align with recognised global standards on environmental sustainability. This is to adequately position it to play the role of a catalyst for real sector development and value chain enhancement in the economy.
These disclosures were contained in a statement by the Bank’s Managing Director/CEO, Dr. Tony Okpanachi, and made available to THEWILL.
According to the statement, the Bank recognised that MSMEs in Nigeria need several players to intervene in alleviating their constraints amid domestic and global challenges.
It stated that “we keep broadening our funding base to make financing more available for MSMEs in line with our overarching mandate to alleviate financing constraints for MSMEs in Nigeria”.
The Bank said it has disbursed N482 billion to more than 208,000 MSMEs since inception in September 2014 to end of 2021 and that it had defied the challenging environment to create a record of sustainable profitability.
DBN explained that its profitability had remained resilient despite the challenging environment and the impact of COVID-19.
The statement revealed that the Bank’s profit before tax and profit after tax stood at N22.7 billion and N15.7 billion respectively, translating to return on assets and return on equity of 4.8 percent and 12.8 percent respectively for 2021, which was its last audited financial period.
The development finance institution explained that its unique products and programmes, targeted at meeting the peculiar needs of MSMEs, had earned it recognition from major rating agencies.
It said, “DBN has various products and programs targeted at meeting the needs of MSMEs. For instance, DBN has an interest drawback program for its PFIs through which they grant rebates on loans to MSMEs playing within sustainability sectors such as renewable energy, waste management, and the others.”
It stated that, across other metrics such as environmental sustainability, DBN had taken major steps to ensure that its processes and operations align with the global standards on environmental sustainability.
“A major feat in this direction is the achievement of the highest global rating of the Sustainability Standards and Certification Initiative (SSCI) by the European Organisation for Sustainable Development in 2021. In the same year, the Bank clinched the highest credit rating, Triple ‘A’ from Agusto & Co, and GCR.”
Noting that the challenges within the MSME space are quite substantial, especially as it relates to accessing finance, the Bank said it has taken proactive measures to address them.
It explained that the issues are best addressed when several players can provide support to this space hence it has stepped up measures to ensure proper collaboration among the players.
“Therefore, part of our role at DBN is to assess the objectives of these other institutions and collaborate with them to provide financing support to MSMEs. In many cases, DBN also offers technical assistance programmes to these institutions to augment their capacity to lend to MSMEs.
Outlining its sustainability strategic plan, the Bank said, “In the short term, we plan to strengthen our catalytic role in the Nigerian economy by expanding our reach to more MSMEs in underserved regions such as crisis-impacted areas and enhancing development impact in other key areas such as women- and youth-owned enterprises, startups, and first-time borrowers.
“We will also continue to build our internal capacity to drive the growth ambition of the institution. In addition, we plan to amplify our sustainability drive through the implementation of our green finance strategy, leveraging our SSCI certification, and exploring Green Climate Fund (GCF) accreditation as a direct access entity.
“In the medium term, we plan to complete the digital transformation efforts currently underway within the Bank and expand our channels of disbursement to MSMEs, which speaks to our drive for increased collaboration with other players within the space.
“In the long term, our focus is for DBN to be recognized locally and internationally as the foremost institution driving the growth and sustainability of the Nigerian economy through the provision of financing support to MSMEs.
“As a DFI that is not just sustainability-conscious but has it interwoven into the fabric of the organization which is reflected in our core values, it is important we continue to strengthen our capital base.
“Also, this is one of our strategic initiatives which requires our continuous effort to crowd in more investments. To this end, we are on that pathway. We continue to expand our funding base both in terms of capital and debt as may be appropriate to meet the needs of MSMEs.”
As a way of achieving sustainability in the MSME ecosystem, DBN expressed the need for the formalization of the numerous enterprises in the informal space to enable them to enjoy the economy of scale.
The Bank noted that latest data from the National Bureau of Statistics put the total asset of MSMEs in 2020 at N8.41 trillion, while their total number was 39,654,385. Of this figure, over 34 million enterprises are informal. “What’s then your thought on having these huge number of MSMEs still operate as informal businesses?”
The development finance institution said that the formalisation of these enterprises is of utmost importance because of the attendant benefit to the economy and the government.
It noted that the government has done considerable work in promoting the importance of MSMEs however, more needs to be done for obvious reasons.
“Policies that encourage the informal sector operators to formalize, for example, and of course this should be time-bound but the reduction of fees for business registrations and deferred taxes on all businesses would surely encourage the formalization of some of these businesses.
“MSMEs formal or informal are already having a tough time staying afloat. Some of the most pressing problems they face include obtaining finance, irregular power supply, infrastructure deficit, multiple taxations, rent, cost of capital, and so on.
“Giving the plethora of challenges and having already a lowered saving propensity lends credence to why formalization is not a priority to them”, the Bank stated.
DBN confirmed that formal businesses have a higher survival rate as well as an enhanced capacity to run profitably and to use debt more efficiently. It explained that this boost in financial sustainability has a significant impact on economic activities, employment and government revenues by way of taxes and levies.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
